#### Jorge.Beca

##### New Member

I am having problems relating Absolute VaR definition with Delta-Gamma VaR definition.

For example, for a Derivative:

Absolute VaR = -u*T + volatility(S)*delta*SQRT(T)*Z = -u*T + volatility(c)*SQRT(T)*Z

Delta-Gamma VaR = Ac = delta*AS + 1/2 *Gamma*AS^2

I think I understand each formula individually:

Absolute Var = risk factor- current position

Ac = option price change to a a change in stock

...but is hard for me to relate them.

Thanks.